UK PRIVATE RENTED SECTOR MARKET INSIGHTS

Percentage of 16 – 34 year olds in UK who own their property (compared to 60% in 1991)

38

Average age of a first time time home owner in UK (compared to 28 in 2013)

£900bn

Total value of UK Private Rented Sector

HOT TOPIC: BREXIT

Currently the most talked about issue facing the UK investment market, Brexit uncertainty has cause ripple effects across many different sectors and markets. The UK housing market is experiencing a mixed response with the south of UK experiencing asset price depreciation, whilst the north and Scotland experience some growth in property prices. In a recent survey almost all respondents noted that deals were slowing down and investors, sellers and vendors were taking a more cautious approach.

UK PRS IN THE NEWS

Landlords continuing to bale out of the property market – as Government intended. The article states, “the main reasons for landlords exiting the market are tax changes, constant regulation and increasing legislation, landlords moving back in to their properties, and lower investment returns, as well as uncertainty over Brexit and what this will mean for the market.”

THE UK MARKET

The UK Private Rented Sector, with a total value of £900bn, is now a significant market sector and credible investment asset class, and one which has recorded consistently high growth over the past 5 years and is projected to continue to grow over the next 5. Property management in the UK continues to be a very fragmented market (over 15,000 agents currently in the UK) dominated by small companies with little scope, appetite or finance for growth. With an increasingly high proportion of total housing stock being in the private sector, significant investment opportunities exist for companies with the passion, expertise and financial capital to capture market share.

The market is extremely fragmented and has developed this way over the last 50 years. This is now changing rapidly driven mainly through new government initiatives such as increased taxation, increased legislation and regulation. The government is determined to tighten up on this previously unregulated sector and improve standards and force professionalism into the market. The days of the smaller landlords and agents are numbered and the market is wide open for larger experienced operators to dominate this sector.

Five times more rental property is being sold rather than bought in Scotland, where a series of rental reforms are in place, amid warnings that there will be the same level of disinvestment in England and Wales – Property Industry Eye, Aug 2018.

Overall the PRS has doubled in the last 10 years or so, and it is expected to continue to grow to 5.79 million households while 68% of renters still expect to be living in the rental sector in three years’ time – Property Wire, Jun 2018.

Affordability constraints in the sales market are also curtailing some tenants’ plans for house purchase, resulting in a longer stay in the PRS as they save for a deposit. There is also growth in the PRS at the more economic end of the housing scale at a time when the private rented sector as a whole is changing. One aspect of this is the continuing growth of large scale investment in Build to Rent or Multi-housing which is professionally managed rental accommodation, usually at scale, in purpose built blocks. This market, which has only emerged in force in the UK in recent years, is now worth an estimated £25 billion – Property Wire, Jun 2018.

The Private Rented Sector in the UK remains proportionally smaller than in Europe and US due predominantly to a different attitude towards renting amongst the population, though this is changing. Since the financial crash in 2008 and political uncertainties linked to the Scottish independence referendum then latterly the UK European Independence referendum and ultimately Brexit, lenders in the UK have made it more difficult to obtain mortgages, driven by government regulations. Requirements for higher levels of deposits for mortgages, increased student debt levels, a growing population and higher levels of um-employment have all contributed to a shift towards the Private Rented Sector.

PRS Group see huge potential for consolidation through acquisition as more small and ‘part-time’ landlord opt to exit the industry.

Latest News

Two property entrepreneurs have offered to donate some of their flats to the homeless, in a unique collaboration with the charity Social Bite. Dundee-based Graeme and Leanne Carling are offering units from their extensive property stock in Tayside free of charge, as part of their involvement with Saturday’s Sleep in the Park event. The couple, […]